Wednesday, July 27, 2011

Robert Shiller: Buy Houses If the US Defaults on Their Debt (NYSE:IYR, NYSE:XHB) | Wall St. Cheat Sheet
It would be easy to think Shiller was going to have confidence in house prices after this comment but the reality is that he thinks interest rates will jump much higher if the US defaults on its debt. With an interest rate rise, prices will drop significantly on houses and Shiller is saying that the prices may be in a range that is a great buying opportunity. However, the price decline might gain even more momentum as interest rates go up. Higher rates will mean less people qualify and less people will be part of the purchasing pool. Besides it really is jobs that is impacting the housing market now and even as it stands, the interest rates are artificially low due to the federal government and as soon as the economy would turn, rates will jump much higher and prices will stagnate or drop. The debt ceiling fiasco is just a distraction for how bad the economy really is even after several years of recession. There was a little bit of news yesterday about the treasury looking to start a program that would lead to principal reduction on housing but by the time they get around to it 75 % of the country might be underwater. They have had over 4 years to do what was right but they have catered to big money and the banks while screwing the home owners. Shiller is just looking for something different to say since the data still says clearly that the housing market sucks and it will for a long time.

{Case-Shiller Index co-author Robert Shiller spoke with FOX Business Network about the state of the housing market (NYSE:IYR) and the United States debt (NYSE:TLT) crisis. Shiller discussed the possibility of a U.S. default and therefore a sudden spike in interest rates and said it’s “absolutely a concern” but that “this might be a buying opportunity for houses.” He also said, “oddly though, we don’t see that many people thinking that because confidence is down.”

On if he worries about a sudden spike in interest rates if the United States defaults:

“That’s absolutely a concern, so this sounds funny coming from me, but this might be a buying opportunity for houses. If we’re gonna see a spike in interest rates, home prices are gonna come down a lot, it could be a good time to buy. Oddly though, we don’t see that many people thinking that because confidence is down.”}

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